75 years A Rich History of Your Member-Owned Cooperative 1941 – 2016 2016 Annual Report 2 SALEM ELECTRIC 1941 – 2016 The co-op’s first office located on Front Street. President Franklin D. Roosevelt signs the Rural Electrification Act bringing rural America into the age of electricity. 1936 July 23rd Harry Read filed with the State Corporation Commission to organize a cooperative to serve in an urban area already served by a private utility. 1937 1938 1939 Salem population: 30,908 1940 SERVING MEMBERS Table of Contents Harry B. Read, visionary and founder of the Salem Electric Cooperative. April 24th Salem Electric Cooperative began distributing power to 22 members. 1941 75 YEARS 3 Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 President’s Message. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Manager’s Message . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Administrative Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Engineering & Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Information Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Member Services . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 17 Cash Flow . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 18 5-Year Growth Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Statistical Information . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 26 Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Distribution system purchased from Harry Read for $15,000. Hand-posted ledger cards used to track billing and patronage records. 1942 1943 1944 1945 4 SALEM ELECTRIC 1941 – 2016 2016 Overview 20,000 2010 15,000 2016 2000 1990 10,000 1980 1970 5,000 1960 1942 1950 The number of members has continued to grow since the 1940s. 20,000 75 Years. It was April 1941 when Salem Electric’s lines were energized. Founder Harry Read had fought numerous battles from the time Salem Electric was founded in July 1938 until April 24, 1941, when five commercial and 17 residential members received power through a Salem Electric meter. 15,000 The Rural Electrification Act, signed by President Roosevelt in 1936, provided funding for the installation of electrical distribution systems in rural areas leading to the creation of hundreds of electric co-ops across the United States. Salem Electric wasn’t 10,000 rural, but Harry obtained electrical equipment on credit and invested his own money to make this small electric cooperative, surrounded on all sides by a large investor5,000owned utility, a reality. In mid-1942 membership was growing and Salem 0 Electric purchased the system from Harry who continued as general manager. First member newsletter titled The Star is created. 1946 1947 Intersection of Wallace Road and Edgewater Street during January 1948 flood. Ben Maxwell photo, Salem Public Library Historic Photograph Collections. 1948 1949 Salem population: 43,140 1950 SERVING MEMBERS 75 YEARS By 1947 membership had grown, but growth was scattered with no defined service area. Harry fought to allow the attachment of Salem Electric lines to PGE poles and in 1948 the Oregon Supreme Court agreed. Unfortunately, Harry died before the decision was handed down. Growth and active competition kept the next 20 years interesting. In 1968 things changed when Salem Electric signed a territorial agreement with PGE. The agreement designated Salem Electric’s 17.5 square mile service area including West Salem, portions of Downtown Salem, Keizer, and the Northgate area. Over the next several decades membership grew, the office was relocated, and Salem Electric’s five goals of Reliable Service, Financial Integrity, Good Customer Relations, Good Employee Relations, and Low Rates were developed. Goals still used today. The first 75 years were exciting. The next 75 will be equally exciting due to changes in technology, increased member expectations, and expanded communication methods. 5 Marion Street Bridge construction in 1952. Statesman Journal photo, Salem Public Library Historic Photograph Collections. Rapid growth continued during the 1950s with the system tripling in size. 1951 1952 1953 1954 1955 6 SALEM ELECTRIC 1941 – 2016 President’s Message 1957 “Home of the Week” West Salem Heights. Ben Maxwell photo, Salem Public Library Historic Photograph Collections. In 2016 your cooperative celebrated 75 years of bringing you reliable, low cost power with financial integrity while maintaining good member and employee relations. I am proud to be a Salem Electric cooperative member and president of your Board of Directors. Throughout the year your member-elected board approved enhancing member communication, improved equipment installations, and heightened cybersecurity. Our Info Bulletin continued to be a popular read and our website provided relevant and detailed information during our infrequent outages. After answering 60,000 phone calls, greeting nearly 30,000 visitors in the office, and responding to 1,200 emails, the Administrative Services Department launched a Salem Electric Facebook page to further help inform members on co-op issues, events, and outages. Second transmission line constructed across the Willamette River linking West and North Salem. 1956 1957 1958 Essee, the Salem Electric mascot, used in 1960s promotions. 1959 Salem population: 49,142 1960 SERVING MEMBERS 75 YEARS 7 This was a tough winter. Our Engineering & Operations staff, through good system design, preventative maintenance, and hard work, kept outages to a minimum with an annual average outage time of 26 minutes per member. Continued equipment improvements included expanding the Automated Metering Infrastructure (AMI) Program. AMI provides real-time energy usage to members and allows Salem Electric to more quickly identify outages, hopefully further reducing outage time. (continued on next page) West Salem Junior High School built in 1961, now Walker Middle School. Statesman Journal photo, Salem Public Library Historic Photograph Collections. Data sent via punch cards to an outside service with one of the first available computers. Columbus Day Storm hits Salem. All Salem Electric members lose power. 1961 1962 1963 1964 1965 8 SALEM ELECTRIC 1941 – 2016 Our Information Technology Department continued to improve internet security through ongoing staff training, updated programs and software, and implemented measures to provide improved data recovery. Our Scholarship Program remained strong with dozens of applications received and 10 scholarships awarded. September Salem Electric sponsored a three-day Member Appreciation Event celebrating our 75 years. Over 150 co-op members visited the office and learned about our programs and services. It was a good year and your board continues to look to the future preparing for the next 75 years. Joe Van Meter President Joe Van Meter serving the SE Board since 2004. Salemtowne retirement community opens in West Salem, 1967. Statesman Journal photo, Salem Public Library Historic Photograph Collections. 1966 1967 Jere Overs named general manager January 1, 1968. 1968 Salem Electric and PGE reach territorial agreement for Salem-Keizer area doubling the co-op’s service territory over 10 years. Salem population: 68,296 1969 1970 SERVING MEMBERS 75 YEARS 9 The Front Street office built in 1968. Inventory control, construction work orders, and patronage records are automated. 1971 1972 1973 1974 1975 10 SALEM ELECTRIC 1941 – 2016 Manager’s Message I can only imagine how happy Harry was when Salem Electric’s lines were energized in 1941. The Overview briefly took you through our 75 year history and some of the challenges Harry faced. Although he died after just nine years as general manager, his legacy of serving members continued and was expanded under manager Jere Overs’ tenure. Overs, hired in 1956, was general manager from 1968 until his retirement in 1996. Overs also faced challenges including the Columbus Day Storm followed two years later by flooding that Governor Mark Hatfield called, “the worst disaster ever to hit the state.” In 1976, Salem Electric received a notice of insufficiency from the Bonneville Power Administration (BPA) that stated, “…as of July 1983 BPA will not be able to meet the co-op’s energy requirements.” This led to Salem Electric’s involvement in the Washington Public Power Supply System nuclear projects and their ultimate default resulted in a costly legal battle and large rate increases. Salem Electric’s founder and first general manager, Harry Read. BPA issues “Notice of Insufficiency”; Salem Electric enters into contracts for output from WPPSS Projects Nos. 4 and 5. Move into new West Salem headquarters. 1976 Established annual program to refund capital credits to members. Software designed and implemented to enable all data processing functions to be done in-house. 1977 1978 Salem population: 89,233 1979 1980 SERVING MEMBERS 75 YEARS 11 When Bob Speckman joined SE in 1982, his role was to expand public, community, and employee relations. With northwest utility rates dramatically increasing, there was need for open and ongoing communication. To achieve this, Speckman developed the Info Bulletin included in monthly bills and encouraged more staff participation in local business and service organizations. According to Speckman, who became general manager in 1997, “Everyone who works at SE is support staff – supporting our members, board, and each other by working together to achieve the goals developed by Jere long ago.” Speckman also pointed out that Salem Electric’s participation in numerous statewide, regional, and national organizations is a critical component of Salem Electric’s continuing success. These organizations represent and act on behalf of electric cooperatives and public power. Speckman retired in 2014. As Salem Electric’s current general manager, I face new challenges including the retirement of baby boomers, which led us to implement a Career Development (continued on next page) Installed Supervisory Control and Data Acquisition System for automated load switching. 1981 Installed second river crossing circuit at Stark Street (SE’s fourth). Residential Weatherization Program begins. Word processing allows for document storage on disks for future retrieval. 1982 Salem Electric’s Member Assistance Program begins. 1983 Second river crossing circuit at Stark Street. 1984 1985 12 SALEM ELECTRIC 1941 – 2016 Program for employees; increased member expectations, resulted in the expansion of our communication efforts through print, web, and social media; the ongoing threat of cyber attacks, led us to implement additional training and testing; legislation that impacts rates, regulation, and local control; and a shift in the way Salem Electric is billed by BPA, requiring us to adopt a plan to increase our basic charge to recover our infrastructure costs. While much of our success is due to our current employees and board members, we wouldn’t be as successful without our previous general managers, board members, and retirees. Thank you for the confidence you place in your electric cooperative. We are prepared to meet the challenges ahead and we look forward to serving you for the next 75 years — and beyond. For more information visit us at SalemElectric.com Like us on Facebook Terry Kelly General Manager Terry Kelly, serving members since 1983. H.B. Read Substation completed and energized. Conservation program implemented for commercial and industrial members. Expanded the Member Assistance Program to include persons with disabilities. 1986 1987 1988 1989 Salem population: 107,786 1990 SERVING MEMBERS 75 YEARS 13 Salem Electric’s Goals Reliable Service In other words, keeping the lights on. Financial Integrity Salem Electric operates with funds from a single source — our members’ electric bills. It is our duty to spend their money wisely, yet provide adequate financing to achieve the cooperative’s other goals. Good Customer Relations Providing friendly, efficient service, and maintaining open communication with our members. As a member-owned organization, our customers are our members. Good Employee Relations This results from an atmosphere of cooperation and open, two-way communication between all staff members. Low Rates Approximately 50% of our retail rate reflects the cost of purchasing electricity from our supplier — The Bonneville Power Administration. Our success in this goal is determined by how efficiently we use the remaining controllable portion of our costs while achieving the first four goals. Individual PC equipment provided for all employees. Noteworks is Salem Electric’s first in-house email system. 1991 Undergrounding of Salem Electric’s facilities along River Road completed. Developed and funded a loan option for Residential Weatherization Program. 1992 1993 1994 1995 14 SALEM ELECTRIC The SE Board approved a green power contract with 15% of SE’s power provided by the Wyoming Foote Creek Wind Project, 1997. December 12 windstorm described as “the worst since the Columbus Day storm of 1962” causes multiple outages. 1996 Jere Overs retires after 41 years; 29 as general manager. Board selects Bob Speckman as general manager effective January 1, 1997. AutoPay Program implemented. 1997 1941 – 2016 Administrative Services Administrative Services has changed from a labor intense, manual operation, to numerous automated services that still offer a human connection. We pride ourselves on having a real person answer each call received, greeting you with a smile when you stop by the office, and finding solutions to challenges. One automation tool that allows you to access your account information, make online payments, or sign up for a variety of notifications is SmartHub. Stop by the office, call, or click— we’re here to help. We look forward to continuing to serve our members with a friendly voice and a smile for the next 75 years — and beyond. Heat Pump Program implemented. First website developed; the Info Bulletin and Board Report published online. 1998 Board votes unanimously to authorize purchase of three BPA substations. 1999 SE purchases its first hybrid vehicle, a Ford Escape, 2005. Salem population: 136,924 2000 SERVING MEMBERS 75 YEARS 15 Engineering & Operations The way we deliver power to homes and businesses hasn’t changed much over the years. Equipment has changed, along with tools, training, and safety regulations. Utilities pride themselves on their active safety programs to prevent injuries and reinforce a safety culture throughout the company. Our staff takes pride in preventing outages through system design, equipment testing, maintenance, and inspections. In outage situations we do our best to respond quickly, diagnose the problem, and restore service as soon as possible. Throughout the process we try to keep members informed through our website and we’ve recently added a Facebook page to our communications options. We look forward to continuing to serve our members with safe, reliable power for the next 75 years — and beyond. Willie Ball and Terry Kelly carry photovoltaic panels to be installed at West Salem High School. 2001 Member Assistance Program reaches $1 million paid in assistance. 2002 Habitat Improvement Program begins. 2003 Widening Orchard Heights Road for the new West Salem High School, 2002. 2004 2005 16 SALEM ELECTRIC Replacement substation transformer delivered by railcar to Rickreall, then by truck to Hughes Substation, 2005. Information Technology Information Technology (IT) plays a vital role in our success today, but didn’t even exist until decades after we were founded. The initial goal of IT was to simplify and automate processes and procedures, but over the last few years cyber and information security has taken the forefront. While no one can guarantee a cyber incident won’t happen, we are doing our best to stay ahead of the threat by providing ongoing training so employees are aware of potential threats, regularly monitoring systems and installing protective software where needed, and changing procedures on how information is accessed and stored. We look forward to continuing to serve our members and keep your information secure for the next 75 years — and beyond. Online bill pay, electronic bill notifications and newsletter offered to members. SE utilizes infrared thermography technology. 2006 1941 – 2016 Board approves incentives for Photovoltaic Program. 2007 2008 Salem population: 154,637 2009 2010 First fiber optic installation completed connecting Salem Electric office and Hughes Substation. 2011 SERVING MEMBERS 75 YEARS 17 Member Services We take pride in the customer service we provide to our members. It was important to our founder, it is one of the co-op principles, and it’s one of our five goals. That service is reflected in various ways. Our Member Services Department focuses on the efficient use of the product we sell and helping you save money through our numerous energy efficiency programs. Are you interested in the latest lighting products? Do you need a new heating system, appliance, or additional insulation in your home? Stop by the office, call, or click — we’ve got a solution. We look forward to continuing to serve our members and help you save energy and money for the next 75 years — and beyond. SE Energy Analyst Willie Ball discusses electrical safety at the Keizer Fire Department Safety Open House, 2006. Additional network cybersecurity software installed. 2012 Implemented AMI mini-pilot project. 2013 Bob Speckman retires after 32 years; 17 as general manager. Board selects Terry Kelly as general manager effective May 1, 2014. 2014 Board authorizes full AMI deployment. 2015 2016 18 SALEM ELECTRIC Cash Flow Miscellaneous Income $297,186 1% 1941 – 2016 Street Lighting 1% Interest >1 % ($5,420*) Taxes $403,508 ($1,495,880) Cost of Power 5 ($12,877,192) General Service 38% $10,607,586 Available for Plant Improvements % 46% 60% 13% ($3,580,644) 36% Operating Expenses ($10,153,192) Residential $16,804,048 Where it came from How it was used *Interest on member deposits held by Salem Electric. SERVING MEMBERS 75 YEARS 19 5-Year Growth Highlights 20162015 2014 2013 2012 Electric Plant in Service — Depreciated $37,338,071$35,845,886 $33,601,078 $31,857,631 $29,712,262 Maximum System Peak Demand in MWs* Summer 68.7268.24 63.77 65.45 63.55 Winter 69.5465.31 72.40 75.75 64.12 kWhs Sold 311,901,820309,487,937 315,921,792 320,328,174 312,072,916 Gross Revenue $28,112,328$26,123,164 $26,155,331 $25,590,660 $24,832,971 Net Margin Taxes Number of Accounts Billed Number of Employees Capital Reserve Refunds $2,017,427$1,964,120 $2,671,053 $3,276,283 $3,612,611 $1,495,880$1,404,062 $1,395,418 $1,387,190 $1,333,010 19,33919,209 19,074 18,759 18,578 49 5049 4949 $1,662,316$1,666,997 $1,806,648 $1,721,815 $1,521,107 *91.07 MWs historic peak was set 12/23/98. 20 SALEM ELECTRIC 1941 – 2016 Financial Statements: Balance Sheet ASSETS 20162015 Distribution Plant in Service — Depreciated $32,971,145$31,534,940 General Plant in Service — Depreciated Construction Work in Progress Cash and Temporary Investments Receivables (Net) 4,366,9264,310,946 33,64015,600 LIABILITIES & EQUITIES Long Term Debt Accounts Payable — BPA 2016 2015 $0$0 1,276,3371,140,003 Other Accounts Payable 119,93784,860 Consumer Deposits 389,833362,669 Accrued Expenses 2,522,9452,459,543 15,482,61915,724,252 Other Liabilities 11,172,13112,242,979 2,416,4962,128,599 Member Equity 36,287,44034,353,164 Materials and Supplies 935,8351,084,354 Capital Credits Retired 4,108,1213,909,430 Prepayments 568,469569,905 Capital Credits Payable 1,237,9201,133,837 Other Assets 339,534317,889 Total Assets $57,114,664 $55,686,485 Total Liabilities & Equities $57,114,664 $55,686,485 SERVING MEMBERS 75 YEARS 21 Statement of Income and Expenses INCOME Residential General Service 20162015 $16,804,048$15,572,560 10,607,5869,906,874 Street Lighting 403,508373,167 Miscellaneous 297,186270,563 Total Income $28,112,328 $26,123,164 EXPENSES Cost of Power Operating Expenses Depreciation and Amortization Taxes Interest Total Expenses Net Margin 20162015 $12,877,192$12,276,793 10,153,1928,995,067 1,563,2171,477,968 1,495,8801,404,062 5,4205,154 $26,094,901 $24,159,044 $2,017,427 $1,964,120 22 SALEM ELECTRIC 1941 – 2016 Programs ENERGY-EFFICIENT LIGHTING Lights Sold/Installed/Distributed (CFL bulbs, LED bulbs, and hard-wired fixtures)517 Annual kWh Savings 23,172 WEATHERIZATION Of the homes weatherized, 35 households qualified for our energy assistance program. Homes Weatherized 76 Annual kWh Savings 158,790 HEAT PUMPS Units Installed (standard and ductless) Annual kWh Savings 128 476,055 ENERGY-EFFICIENT APPLIANCES Refrigerators53 Freezers17 Clothes Washers 30 Water Heaters 20 Heat Pump Water Heaters 2 Total Units 122 Annual kWh Savings 11,113 SERVING MEMBERS ENERGY SMART DESIGN Projects Completed Annual kWh Savings ENERGY SAVINGS PLAN Projects Completed Annual kWh Savings 32 1,382,501 5 1,534,631 In 2016 Salem Electric members saved 3,791,400 kWh — enough to serve 363 homes for one year. 75 YEARS 23 Energy-saving LEDs use 75% less energy and last 25 times longer than a standard incandescent bulb. 24 SALEM ELECTRIC 1941 – 2016 MEMBER ASSISTANCE PROGRAMS HABITAT IMPROVEMENT PROGRAM Heating Assistance Residential members with electric heat who meet income guidelines are eligible for assistance with their winter electric bill through the Salem Electric Member Assistance Program. The Habitat Improvement Program allows Salem Electric members to make automatic monthly contributions through their electric bill to improve local native fish and wildlife habitats. Contributions are forwarded to the Mid-Willamette Watershed Alliance. NON-SENIOR 2016 SENIORS DISABLED NON-DISABLED TOTAL Participants280 280 431 991 Amount $49,123$46,826 $73,146 $169,095 Donations Approximately $13,871 was collected from our members through our voluntary Dollar Check-off Program and Capital Credit donations. Funds are forwarded to local agencies for distribution to our members throughout the year. Donors Funds Donated Habitat Improvement Program launched in 2004. 38 $2,294 SERVING MEMBERS 75 YEARS 25 COMMUNITY RENEWABLE ENERGY Salem Electric strives to be a responsible and supportive member of the communities it serves. Our employees are actively involved in dozens of business, civic, and community organizations. Renewable energy is produced by resources such as solar, geothermal, and water. Salem Electric contributed approximately $47,000 to over 75 organizations and community events in 2016. A college scholarship program is available for individuals residing in Salem Electric’s service area and ten $1,000 scholarships were awarded in 2016. Whether it’s supporting youth activities and local schools, volunteering at or sponsoring family-oriented community events, your electric cooperative is involved. Salem Electric buys all of its power from the Bonneville Power Administration (BPA). According to BPA, approximately 85% of their power comes from dams and other renewable sources. The remaining 15% is generated by other means including some nonrenewable resources (gas and nuclear). Nearly 95% of BPA’s power is “carbon free.” NET METERING Projects Completed Annual kWh Generated 3 11.4 kW 26 SALEM ELECTRIC 1941 – 2016 Statistical Information Accounts Billed Wholesale Power Purchased Capital Reserve Refunds 2016 19,339 2016 $1,662,316 2016 $12,877,192 2015 19,209 2015 $ 1,666,997 2015 $ 12,276,793 2014 19,074 2014 $ 1,805,648 2014 $ 12,124,538 2013 18,759 2013 $ 1,721,815 2013 $ 11,028,474 2012 18,578 2012 $ 1,521,107 2012 $ 10,400,553 2011 18,545 2011 $ 1,458,607 2011 $ 9,589,441 2010 18,516 2010 $ 1,666,544 2010 $ 9,728,745 2009 18,544 2009 2008 18,487 2008 2007 18,338 2007 15,000 Accounts Billed 20,000 $ 1,143,246 $ 1,246,618 $ 1,312,808 15,000,000 Capital Reserve Refunds 2009 $ 10,177,135 2008 $ 11,378,734 2007 $ 11,114,732 10,000,000 Wholesale Power Purchased SERVING MEMBERS 75 YEARS 27 Board of Directors MANAGEMENT STAFF Terry Kelly General Manager Jack Belleque Administrative Services Manager Jeff Lewis Joe Van Meter President Jeff Anderson Vice-President Member Services Manager Alicia Bonesteele Michael Richman Secretary/Treasurer Information Technology Manager Tony Schacher Engineering & Operations Manager Michele Adkins Executive Coordinator Cindy Lenker Executive Assistant Dave Bauer Carl Beach Jerry Berger Paul Ennor 633 7th Street NW PO Box 5588 Salem, OR 97304-0055 phone: 503 362-3601 fax: 503 371-2956 email: [email protected] web: SalemElectric.com Find this publication on our website. 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